Changing the Price of Pork: The Impact of Local Cost Sharing on Legislators' Demand for Distributive Public Goods

43 Pages Posted: 24 Jul 2000 Last revised: 8 Oct 2010

See all articles by Alison F. Del Rossi

Alison F. Del Rossi

Saint Lawrence University - Department of Economics

Robert P. Inman

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Date Written: March 1998

Abstract

The provision of public services through national legislatures gives legislators the chance to fund locally-beneficial public projects using a shared national tax base. Nationally-financed, local public goods will be purchased at a subsidized price below marginal cost and may be inefficiently too large as a consequence. An important assumption behind this conclusion is that national legislators in fact demand more of the locally-beneficial project as the local price for projects declines. This paper provides the first direct test of this important assumption using legislators' project choices following the passage of the Water Resources Development Act of 1986 (WRDA'86). We find legislators' chosen water project sizes do fall as the local cost share rises, with a price elasticity of demand ranging from -1.3 for flood control and shoreline protection projects to perhaps as high as -2.5 for large navigation projects. The requirement of WRDA'86 that local taxpayers contribute a greater share to the funding of local water projects reduced overall project spending in our sample by 35 percent and the federal outlay for project spending by 48 percent.

Suggested Citation

Del Rossi, Alison F. and Inman, Robert P., Changing the Price of Pork: The Impact of Local Cost Sharing on Legislators' Demand for Distributive Public Goods (March 1998). NBER Working Paper No. w6440. Available at SSRN: https://ssrn.com/abstract=226187

Alison F. Del Rossi

Saint Lawrence University - Department of Economics ( email )

One Romoda Drive
Canton, NY 13617
United States

Robert P. Inman (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-8299 (Phone)
215-898-8200 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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